The supercommittee was a superdud — and we should be glad. Nonetheless, at some point we’ll have to rein in budget deficits. And when we do, here’s a thought: How about making increased revenue an important part of the deal?Read the rest here.
And I don’t just mean a return to Clinton-era tax rates. Why should 1990s taxes be considered the outer limit of revenue collection? Think about it: The long-run budget outlook has darkened, which means that some hard choices must be made. Why should those choices only involve spending cuts? Why not also push some taxes above their levels in the 1990s?
Let me suggest two areas in which it would make a lot of sense to raise taxes in earnest, not just return them to pre-Bush levels: taxes on very high incomes and taxes on financial transactions.
About those high incomes: In my last column I suggested that the very rich, who have had huge income gains over the last 30 years, should pay more in taxes. I got many responses from readers, with a common theme being that this was silly, that even confiscatory taxes on the wealthy couldn’t possibly raise enough money to matter.
Folks, you’re living in the past. Once upon a time America was a middle-class nation, in which the super-elite’s income was no big deal. But that was another country.
The I.R.S. reports that in 2007, that is, before the economic crisis, the top 0.1 percent of taxpayers — roughly speaking, people with annual incomes over $2 million — had a combined income of more than a trillion dollars. That’s a lot of money, and it wouldn’t be hard to devise taxes that would raise a significant amount of revenue from those super-high-income individuals.
Large scale redistribution of wealth has never lead anywhere other than into the economic gutter.
10 comments:
Well, our real long-term debt crisis began when we stopped taxing the rich and corporations fairly - thus goosing the economy and overbuilding the financial services sector.
What's being talked about is also not redistribution of wealth, it's called progressive taxation. Actually, it's sort of the potluck theory of society: we all bring what we can (some more, some less), but we all eat (regardless of how much we brought).
In addition, a recent analysis from the nonpartisan Tax Policy Center "points out that before the 1981 tax cuts there used to be a larger number of tax brackets, with a number of brackets well above the current 35 percent maximum. And it asks how much revenue would be raised if those above-35% brackets were still in place; that’s quite close to the question of how much money might be raised through higher taxes on the very rich.
Their answer is that in 2007 the higher brackets would have raised an additional $78 billion, or a bit over half a percent of GDP. By the way, that estimate takes into account the likely “elasticity of taxable income”, i.e., the disappearance of some income from the tax rolls either through reduced actual earnings or through avoidance.
So, what I did was to apply that revenue as a percent of GDP to CBO projections of GDP over the next decade. And what this says is that going back to pre-Reagan-type higher-income taxation would yield about $1.1 trillion over the next decade.
That would not by itself close the budget gap– but as I’ve been saying, no one thing would. And, you know, $1.1 trillion here, $1.1 trillion there, and soon you’re talking about real money."
Lol. The us has the lowest tax burden among industrial nations - one reason perhaps we are trending to 2nd world status.
And what this says is that going back to pre-Reagan-type higher-income taxation would yield about $1.1 trillion over the next decade.
LOL. So that's your plan to raise an amount equal to our annual deficit over ten years. The USG simply spends too much money.
Oh, and those pre-Reagan rates? Nobody paid them--the rich did not work harder to pay more than half their income in taxes. They took the year off and sold assets or got sweetheart loans against future cash flow, they deferred income, negotiated non-cash remuneration, sheltered income in real estate, opened accounts in Switzerland and the Bahamas.
That is the reality that homo economi like Krugman just cannot get their heads around: past a certain percentage of GDP (the sweet spot appears to be around 20%), capital just leaves the country or enters the black market. Or the country stops generating net tax production.
The us has the lowest tax burden among industrial nations - one reason perhaps we are trending to 2nd world status.
That's a demographic issue, not a fiscal one.
"$1.1 trillion here, $1.1 trillion there, and soon you’re talking about real money." There's no single silver bullet for either deficits or debt - the only ones claiming there is are those who advocate spending cuts alone. Deficits are only about spending for those selling the snake oil of tax cuts (alone) as the cure for whatever ails you. Deficits are as much about decreased revenues as they are about spending beyond our means.
Also, the nonpartisan TPC analysis takes into account the “elasticity of taxable income” that would result from higher tax rates on the rich.
Please unpack you demographic comment. That could be taken a number of ways.
The US has lowest real tax rate in the industrialized world, whatever the official tax rates are.
Statistics on things from infant mortality to health to education to infrastructure are what shows us sliding into second world status compared to industrialized nations. We've stopped spending on the things that had put us at the top of the rankings in all these things in the past. War seems to be the only kind of deficit spending stimulus Republicans believe in these days.
US statistics on infant mortality, IQ, disease rates, etc. are trending to Third World levels because we are importing millions of Third World peoples. Infrastructure deterioration is related to this, with heavier loads on infrastructure than the tax base can support.
When the stats are disaggregated, the US turns out to be a very healthy, intelligent place.
I'll make it easy for the TPC's econometrists: progressive taxation decreases the marginal utility of labor. That's why the numbers will never add up. Italy has very "healthy" tax rates--do you think anybody pays them?
Re education, it's only when you back out the poor that the US has a good education system. I'm guessing a similar point can be made regarding the other areas mentioned. Besides, contrary to popular belief, we as a nation aren't being swamped by poor, illegal immigrants from around the world. That doesn't account for the low rates.
I will trust the TPC over a blogger any day. Those factors were taken into account.
"US statistics on infant mortality, IQ, disease rates, etc. are trending to Third World levels because we are importing millions of Third World peoples.'
I didn't know infant mortality was an import, ( for instance- Alabama, Mississippi, not huge importers of Third World peoples, have a very hight infant mortality rate, ( mainly among black Americans, but I suppose they are "old imports" ).
Did you know life expectancy decreases for those coming from the Third World? ( Has to do with the all-American diet, they think).
Your attitude is very strange.
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